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8th Circuit Decides Issue of First Impression Regarding Adverse Inference Instruction

Posted on February 13th, 2013

Monday’s blog discussed the district court case involving plaintiff Hallmark suing its former VP, Janet Murley. In response to plaintiff discovery requests, it was revealed that Murley had disclosed, then deleted, 67 electronic documents regarding Hallmark’s confidential and proprietary information to a competitor. The judge issued an adverse jury instruction regarding the deletion of the files, and the jury came back with a verdict against Murley in the amount of $860,000.

Murley appealed. In Hallmark Cards Inc. v. Murley, No. 11-2855 (8th Cir. 2013), Murley argued the court failed to make explicit findings that she had acted in bad faith and prejudice and sought to overturn the jury verdict.

The 8th Circuit held that the evidence presented at trial strongly suggested the presence of both bad faith and prejudice.  Specifically that Murley held on to this confidential information for five years until she learned that the computer forensics expert would investigate her hard drive and then only about 48 hours before the expert copied the hard drive, were 67 electronic documents deleted.

Further, the Court noted that the deletion of such files would prejudice Hallmark, as their allegations hinged on Murley’s retention and disclosure of confidential information. These facts were enough for the 8th Circuit to hold that Murley’s contention that no requisite findings were made was unpersuasive.

Notably however, no explicit findings were ever made.  Must the district court make explicit findings, or can implicit findings suffice? The 8th Circuit noted this is an issue of first impression, and looked to its own prior case law that suggested “an explicit finding of bad faith” is required for sanctions for pre-litigation spoliation of evidence.

In a surprising move, although the 8th Circuit agreed that the district court failed to make the findings explicit, it held that this was a harmless error. Accordingly, the defendant was denied a new trial (but it did remand with instructions to reduce the jury award on other grounds).

Maybe Hallmark will write a new sympathy card for defendants who engage in electronic evidence spoliation who subsequently lose big at trial?

ILS – Plaintiff eDiscovery Experts

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